In October 2025, Kenya converted three Chinese loans linked to its Standard Gauge Railway from dollars into yuan, a move Bloomberg estimated would initially save about 215 million dollars a year in debt-servicing costs, as part of broader African efforts to reduce reliance on the U.S. currency for debt, trade and payments.
Dollar retains its position in reserves and debt
The dollar accounted for 57.13% of global foreign-exchange reserves in the first quarter of 2026, up from 56.42% at the end of 2025, while the yuan's share stood at just 1.99%, according to the latest International Monetary Fund data. The IMF noted that exchange-rate movements affect these shares, meaning changes in the dollar's proportion do not fully reflect deliberate selling by central banks.
In Africa, more than 80% of cross-border payments between African banks historically passed through clearing centers outside the continent, according to the African Export-Import Bank, or Afreximbank, which estimated that reliance on this infrastructure costs billions of dollars a year. By contrast, the Atlantic Council says about 60% of Africa's external public debt is denominated in dollars.
The currency moves coincided with an approximately 18% increase in trade between China and Africa during 2025, according to Chinese customs data reported by Reuters. Afreximbank said China now accounts for about 20% of Africa's external trade, compared with about 5% two decades ago, while Beijing eliminated tariffs on imports from 53 African countries starting last May.
Debt conversions shift currency risk to the yuan
Subsequent data on the conversion of Kenya's loans showed that payments on one installment fell by more than a third from the same period a year earlier. Bloomberg, however, cited an IMF warning that switching to the yuan creates new currency risks, even as it lowers borrowing costs.
Ethiopia has begun talks with China to convert part of its dollar-denominated debt into yuan. The move would reduce exposure to the dollar, but would tie repayment of part of the debt to the availability of regular yuan flows and to trade and financial relations with China.
Yuan expands as a complementary settlement currency
The Central Bank of Nigeria renewed a currency-swap agreement with China in December 2024, worth 15 billion yuan (about 2 billion dollars), to facilitate direct trade and reduce the need for the dollar as an intermediary currency, according to the Council on Foreign Relations.
In June, the People's Bank of China granted Standard Bank and Industrial and Commercial Bank of China licenses to operate the Renminbi Clearing Bank in Africa, with an operating mandate covering 19 African countries. Standard Bank was the first African bank to join China's cross-border payments system, and announced in July that it had processed transactions worth more than 8 billion yuan (about 1.2 billion dollars) through the system.
Ecobank Group Chief Executive Jeremy Awori told Reuters that the bank is in talks with Bank of China to launch direct settlement between African currencies and the yuan by the end of 2026, saying small and medium-sized African companies are seeking payment methods that reduce the cost of routing transactions through the dollar. Standard Chartered's chief executive in Kenya described the yuan to Reuters as a currency that complements the dollar, rather than a replacement for it at this stage.
PAPSS expands local-currency settlement
The Pan-African Payment and Settlement System, or PAPSS, launched by Afreximbank in cooperation with the African Union and the secretariat of the African Continental Free Trade Area, offers a different route based on payment and settlement in local currencies instead of using an intermediary foreign currency.
Following the recent accession of the Bank of Central African States, the system now links 28 countries, more than 190 banks and fintech companies, and 16 national payment networks, according to the latest PAPSS data. Afreximbank estimates that widespread adoption of the system could save the continent more than 5 billion dollars a year in transaction costs. That is an estimate of potential benefits at full scale, not savings already realized.
These developments point to the emergence of a multi-currency African system in which the dollar retains a central role in debt and reserves, while the yuan expands in China-related trade and local currencies gain more room through PAPSS. But diversifying settlement currencies does not eliminate the risks posed by weakness in some African currencies, trade imbalances or central banks' need for international reserves.
